In Search for Stability in Crypto-Assets: Are Stablecoins the Solution?

55 Pages Posted: 3 Sep 2019

See all articles by Dirk Bullmann

Dirk Bullmann

European Central Bank (ECB)

Jonas Klemm

European Central Bank (ECB)

Andrea Pinna

European Central Bank (ECB)

Date Written: August, 2019

Abstract

Stablecoins claim to stabilise the value of major currencies in the volatile crypto-asset market. This paper describes the often complex functioning of different types of stablecoins and proposes a taxonomy of stablecoin initiatives. To this end it relies on a novel framework for their classification, based on the key dimensions that matter for crypto-assets, namely: (i) accountability of issuer, (ii) decentralisation of responsibilities, and (iii) what underpins the value of the asset. The analysis of different types of stablecoins shows a trade-off between the novelty of the stabilisation mechanism used in an initiative (from mirroring the traditional electronic money approach to the alleged introduction of an “algorithmic central bank”) and its capacity to maintain a stable market value. While relatively less innovative stablecoins could provide a solution to users seeking a stable store of value, especially if legitimised by the adherence to standards that are typical of payment services, the jury is still out on the potential future role of more innovative stablecoins outside their core user base.

Keywords: crypto-assets, distributed ledger technology, electronic money, stablecoins

JEL Classification: E42, L17, O33

Suggested Citation

Bullmann, Dirk and Klemm, Jonas and Pinna, Andrea, In Search for Stability in Crypto-Assets: Are Stablecoins the Solution? (August, 2019). ECB Occasional Paper No. 230, Available at SSRN: https://ssrn.com/abstract=3444847

Dirk Bullmann (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jonas Klemm

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Andrea Pinna

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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